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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

. .'

U.S. SECURITIES AND EXCHANGE COMMISSION : 100 F Street, N.E. Washington, D.C. 20549,

Plaintiff,

Case: 1:10-cv-01648 v.

Assigned To : Friedman, Paul L. Assign. Date: 9/29/2010

ABBLTD, Description: General Civil Affolternstrasse 44 Zurich, Switzerland CH-80S0,

Defendant.

. ; .' . '... . ------~-------~--~-----~-~---~--~------------------------------~~-------

';'. .,'.....; :.. :

COMPLAINT . ,': .. . -:..."

Plaintiff~U.S~ Securities and Exchange Commission (the "Coirunission"), alleges:

.. SUMMARY. 1. This action involves violations of the anti-bribery, books and records, and

internal controls provisions of the federal securities laws arising from bribery and

kickback schemes at subsidiaries ofABB Ltd ("ABB"). ABB, a Swiss corporation, is a

global provider ofpower and automation products and services. From 1999 to 2004,

ABB, through a U.S. subsidiary and six foreign-based subsidiaries, offered and paid

bribes to government officials in Mexico to obtain and retain business with government

owned power companies, and paid kickbacks to Iraq to obtain contracts under the United

Nations Oil for Food Program (the "Program"). In all, ABB's subsidiaries made at least

$2.7 million in illicit payments in these schemes to obtain contracts that generated more

than $100 million in revenues for ABB.

2. ABB, through a U.S. subsidiary, violated Section 30A of the Securities

Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78dd-l] by offering and paying

bribes to Mexican government officials to obtain and retain business. ABB violated

Section 13(b)(2)(A) of the Exchange Act [15 U.S.c. § 78m(b)(2)(A)] by improperly

recording these and other illicit payments as legitimate business expenses in its books and

records. ABB violated Section 13(b)(2)(B) of the Exchange Act [15 U.S.c. §

78m(b)(2)(B)] by failing to devise and maintain internal controls sufficiynt to detect and .

prevent these illicit payments.. ". ;." .

.- '. . .JU~RlSDlCTJON ..' .~ .. '

.)._ This court hasjurisdictionover tbisaction-pursuant to Sections 21(d), .. . .. : 0"

.21(e), and 27 ofthe Exchange Act [15lJ.S.C..§§ 78u(d), 780(e), and78aa]. ABB, :. -: :..

directly or indirectly, madeuse ofthe means orinstrllinentalities ofintetstate co:rriIDerce~

of the mails, or of the facilities of a national securities exchange in connection with the

transactions, acts, practices, and courses of business alleged in this Complaint.

VENUE

4. Venue is appropriate in this Court under Section 27 ofthe Exchange Act

[15 U.S.C. § 78aa]. ABB does busi!1ess in thisjudicial district and certain acts or

transactions constituting the violations by ABB occurred in this district.

DEFENDANT

5. ABB Ltd is a Swiss corporation headquartered in Zurich, Switzerland.

ABB is a global provider of power and automation products and services that operates

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-, ': :..

through hundreds of subsidiaries worldwide. ABB's American Depository Shares have

been registered with the Commission pursuant to Exchange Act Section 12(b) [15 U.S.c.

§ 781(b)] since April 4, 2001, and trade on the New York Stock Exchange unqer the

symbol "ABB."l

RELEVANT ENTITIES

6. ABB Inc. is a wholly owned U.S. subsidiary ofABB Ltd that is

incorporated in Delaware.

.. 7. ABB Network Management ("~BB NM") is a Sugar Land, Texas based

business unit of ABB Inc. ABB NM provides products and services to electric utilities

for managing power generation and transmission networks. . .

8. ABB Near Ea~t Trading Ltdis a95% owned subsidiary of ABB Ltd'

Jordan ("ABBJordan"), ~hicIiis ~\Vholly ownedsubsiciiaryofABBLtd.. . .~.':. . .

9. ABB Automation, ABB Industrie AC Machines, and ABB Solyvent-

Ventec (collectively refeued toas "ABB Fnlnce;'); are ea~h ~holly 6wn~d French

subsidiaries of ABB Ltd. ABB Ltd sold ABB Solyvent-Ventec effective January 31,

2002.

10. ABB AG Vienna Austria ("ABB Austria") is a wholly owned subsidiary

of ABB Ltd.

11. ABB Elektrik Sanayi AS ("ABB Turkey") is a wholly owned subsidiary

of ABB Ltd.

In 2004, in a settled action the Commission filed against ABB, the Court, in addition to other relief ordered, enjoined ABB from violating the anti-bribery, internal controls, and books and records provisions of the Exchange Act. SECv. ABB Ltd, No. 1:04CVOl141 (D.D.C. November 30, 2004) (RBW). The violations alleged in that action involved four ABB subsidiaries located in the U.S. and abroad that, from 1998 to 2003, made over $\.\ million in illicit payments to obtain business in Nigeria, Angola, and Kazakhstan. The violations alleged in this Complaint were not the subject of that prior action.

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FACTS

I. The Mexican Bribery Scheme

12. ABB Network Management ("ABB NM") is a Sugar Land, Texas based

business unit ofABB Inc., a U.S. subsidiary ofABB Ltd, which provides products and

services to electric utilities for managing power generation and transmission networks.

ABB acquired ABB NM, formerly known as Bailey Network Management, in its'

corporate acquisition of Elsag Bailey Process Al,ltomation N.V., in early 1999.

Between 1997 and 2004, ABB NM and its corporate predecessor, paid over $1.9 million

in bribes to government officials and others in Mexico to obtain and retain business with- .

two government owned' electri~utilittys, 90misiop. Fe<l~ral de Electridd(;l<l{"C~E,,)an:d· :>':~-..

. .' '. ".".

- Luz y Fuerza del Centro ("LyFZ,,).Thebribeswere funneled through Mexka.n CompanY

X,ABBNM's agent in MexiCo, and two other companies in Mexico, Intermediary :. _;.-.", • 0•••••••

Company S and Intermediary Company O. ABB, which failed to conduct any due·

diligence on the use or payments to this agent and other ~ompanies, improperly recorded

the illicit payments on its books as payments for commissions and services on the

projects. As a result ofthis scheme, ABB NM was awarded contracts with CFE and

LyFZ that generated over $90 million in revenues and $13 million in profits for ABB.

13. CFE is a utility owned by the government ofMexico that supplies

electricity to over 26 million customers in Mexico. The offer and payment of bribes to

government officials at CFE dates back to at least 1997, prior to acquisition by ABB, and

involved a project called SITRACEN. The SITRACEN contract involved a

comprehensive upgrade of networking systems at CFE's national control center, the

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emergency backup control center, eight area control centers, and eight subarea control

centers. At the time ABB NM's predecessor was bidding on this contract, it agreed to

pay bribes to CFE officials to obtain the contract. CFE awarded the contract to ABB

NM's predecessor in December 1997. The project lasted through 2001 and generated

more than $40 million in revenues for ABE.

14. From 1997 through 2001, ABB NM (and its predecessor) made at least

$913,876.70 in illicit payments in connection with the SITRACEN project. The bribes

were paid through Mexican Company X and Int~rmediary Company S, and falsely

recordedin ABB's books as payments for commis~ions andl~c.al services: ABB NM : .... :'" .

paid at le~t $108,000 to CFE officials or their designees through Mexican Company X,

~dpaid at least another $805,876 to c.PE officials oftheiidesignees through : ',' '.. "

..;":..

.Intermediary CompaI1Y S. ...-:

15. In 2003, ABB NM agreed to payover$SmiHion in bribes to CFEofficials

.... - .,to obtain a contract with CFE for another ll;lfge project called EVERGREEN.'·

EVERGREEN was a contract to maintain and upgrade CFE's networking systems. ABB

NM agreed to pay the bribes to CFE officials over the course of the contract through

phony invoices submitted by Mexican Company X; Intermediary Company Sand

Intermediary Company O.

. 16. ABB Inc. had to obtain approval from ABB to execute the EVERGREEN

contract due to the contract's size and certain contractual terms. During that approval

process, ABB failed to conduct any due diligence on the use or payment terms with the

local agent, Mexican Company X, or other companies to be used in connection with the

project.

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.. ~

17. In October 2003, CFE awarded ABB NM the EVERGREEN contract.

The project lasted through 2007, and ultimately generated approximately $37 million in

revenues for ABE. As part ofthe bribery scheme, ABB NM also was awarded other

smaller contracts with CFE and another government owned utility, LyFZ.

18. In 2003 and 2004, ABB NM paid at least $984,078 in bribes to CFE

officials or their designees in connection with the EVERGREEN project. The bribes

were paid through Mexican Company X, Intermediary Company S, and Intermediary

Company 0, which submitted invoices to ABB 1;JM for phony local services. Despite the

amount and volume of the payments, and the fact that certajD of the payments were made

not to the companies submitting invoices but to the personal bank accounts of

individuals, ABB failed to conduct anyrevi~wofthesepClYments.....

Examples of ~beJilicit Payments

19. ABB NM funneled bribery payments toCFE officials through itsagent in :. :....,

bribes through Mexican Company X as purported commission payments. With the

EVERGREEN contract, ABB NM funneled the bribes through Mexican Company X as

purported payments for local services, for which Mexican Company X submitted phony

invoices to ABB NM. At times, principals ofMexican Company X paid cash bribes

directly to CFE officials and at other times wrote checks or wired money to individuals or

accounts designated by the CFE officials. The following are examples of the illicit

payments:

20. As part of the bribery scheme, in 2000, a principal ofMexican Company

X issued twelve $9,000 checks from a u.s. bank account to the daughter of a CFE

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official. The checks were deposited into an account in her name at a financial institution

in the U.S.

21. As part of the bribery scheme, in 2004, principals of Mexican Company

X, in a series of transactions, wired from their U.S. bank account $197,581 to a U.S.

brokerage account designated by a CFE official. At least $99,912 of this money was

subsequently wired from this U.S. brokerage account to a U.S. bank account in the name

of a daughter and son-in-law of a CFE official.

22. As part ofthe bribery scheme, in:?004, a principalof MexicanCompany

X, through a series oftransactions, withdrew approximately $27,000 in cash from his

personal bank accounts, and paid approximately $20,000 of this cash toa CFEofficial in

Houston, Texas. ." .. ~:.

23.. As partofthebrip~ryscl1eme,in2004, MexicanCompa~yXs.tipmitt~da

$25,000 invoice to ABB NMfor pt.rrPortedlocalservices, which ABB NMpaid. This

invoice was fraudulent as Mexican Company X had provided rio such services.. The

invoice was submitted at the direction of ABB NM in order to pay for a Mediterranean

cruise vacation for two CFE officials and their wives. .

24. As part ofthe bribery scheme, in 2004, Mexican Company X submitted a

$10,000 invoice to ABB NM for. purported local services, which ABB NM paid. This

invoice was fraudulent as Mexican Company X had provided no such services. The

invoice was submitted at the direction ofABB NM in order to reimburse Mexican

Company X for a cash bribe paid to a CFE official.

25. Additionally, as part of the bribery scheme, from 1998 through 2004, ABB

NM paid Intermediary Company S at least $1,074,676 in connection with the

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SITRACEN and EVERGREEN projects, and in 2004, paid Intermediary Company 0 at

least $403,200 in connection with the EVERGREEN project. These two entities

submitted phony invoices to ABB NM, through Mexican Company X, for purported

services rendered. These entities provided no legitimate services to ABB NM. These

payments were part of the scheme to funnel bribes to CFE officials.

26. For example, in March 2004, Mexican Company X received invoices from

Intermediary Company S and Intermediary Company 0 for $218,000 and $327,000,

respectively. Mexican Company X forwarded t4ese invoices, with payment instructions,

to ABB NM. ABB NM paid the invoices by wiring funds to Intermediary Company 8's

bank account in Germany, and to Intermediary Company O's bank account in Mexico.

Shortly thereafter, IntermediaryC?IJ:lp~ny Swired$29~539 from itsaccqun1: in:Genna~y'" . . ,":: '. ". '. . - '" ~:-" " . ...... -.' '.

.:'":".

toa U.s. bank account of a priY(ite llli!it~u:yschool in Wisconsin; to paYtuit.ion for the son .

of a CFE official, and wired an aclditionaf$10,018 directly to a u.s. bank account of :"; .".,

another CFE official.

Kickbacks To The Former General Manager of ABB NM

27. In connection with the bribery scheme iIi Mexico, the principals of

Mexican Company X paid more than $100,000 in kickbacks to the former general

manager ofABB NM. Some ofthe kickbacks were in cash, while others were paid by

check. During the period 2002 through 2004 alone, the principals of Mexican Company

.X delivered to the former ABB NM general manager at least 24 checks totaling

$108,942. At the general manager's direction, the payees on these checks included the

general manager, his family and friends, and his credit card company.

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II. The Embezzlement Scheme at ABB NM

28. Between 2002 and 2004, the former general manager of ABB NM and Ali

Hozhabri, a former project manager for ABB NM, embezzled $468,714 from the

company. They carried out the scheme by requesting and authorizing cash and check

disbursements to pay fictional expenses on contracts ABB NM had with Itaipu

Binancional ("ITAIPU"), an entity owned by the governments of Brazil and Paraguay

that operates a hydroelectric dam, and with Abu Dhabi Company for Onshore Oil

Operations ("ADCO"), a division ofa governmt<nt owned company that provides

electrical power in the United Arab Emirates.

The ITAIPU Contract

29. In 2000, as a result~fa corporatea~qUisiti6n by ABB,ABBNM assuni~d : '. " , . " .>,' '.. ', ':.',-. . ,', . ,". .' ... - '..

.performance of a $6.9 million contrac.t to provide products and services to ITAIPU .

Between 2002 and 2004, the fonneigeiieralmanager ofABB NM and Hozhabri

embezzled nearly $330,000 in connection with the ITAIPUcontract.

30. Under that contract, ABB NM was permitted to adjust previously

submitted invoices to ITAIPU to account for inflation according to a formula specified in

the contract. At the general manager's direction, Hozhabri, the project manager on the

contract, prepared and submitted to ITAIPU approximately $330,000 in "readjustment"

invoices. When ITAIPUpaid ABB NM on these invoices, Hozhabri then submitted

fraudulent requests to ABB NM for disbursements to pay fictitious expenses associated

with the ITAIPU contract. The disbursement requests identified the expenses as

"commissions" or "local works." The general manager then authorized ABB NM's

controller to approve these disbursements so that Hozhabri could take cash to Brazil to

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pay these purported local expenses. The money was not used to pay local expenses in

Brazil, but instead was split between the general manager and Hozhabri and kept for their

personal use.

The ADCO Contract

31. In 2000, as a result ofthe same corporate acquisition by ABB, ABB NM

assumed performance of a $5.9 million contract to provide products and services to

ADCO. Hozhabri also was the ABB NM project manager on this contract. In 2002 and

2003, ABB NM's former general manager and l;Iozhabri embezzled approximately

$145,800 in connection.with this contract.

32. The ADCO contract had various change orders through which ABB NM . . .. ,."

provided additional products.and;>yrvi~es to' A1(cq. ,ABB,NM, through an~B

subsidiary in Abu Dhabi, submitted jnvoicesto ADeo. fur these change orders: When

ADCOpaid certain of these inVOIces, Hozhabri, at the general manager' s direction,

submitted fraudulent requests to ABE NM for cash and checks to'pay phony

"subcontractor fees" in connection with those change orders. The ABB NM general

manager then authorized the ABB NM controller to approve these disbursements so that

.Hozhabri could take cash to Abu Dhabi to pay these purported subcontractor fees. The

money was not used to pay local subcontractors in Abu Dhabi, but instead was split

between Hozhabri and the general manager and kept for their personal use.

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III. The Oil for Food Scheme

A. Background on the United Nations Oil for Food Program

33. The Oil for Food Program was intended to provide humanitarian relief for

the Iraqi population, which faced severe hardship under the international trade sanctions

that followed Iraq's 1990 invasion ofKuwait. The Program permitted the Iraqi

government to sell its crude oil and use the proceeds to purchase food,'medicine, and

critical infrastructure supplies.

34. The proceeds ofthe oil sales wert~ transferred directly from the buyers to

an escrow account (the "U.N. Escrow Account") maintained in NewYork by the United , ,

Nations 661 Committee. Funds in the U.N. Escrow Account were availablefor the

p~rchase of humanit~iansUJ)plie~,,~ubJecttoVN.i:l.pproval ~nd sllperyision. :The iIit~nt . ..'."". .. ". . "....

of this stJ;l1cture was to prevent th~ proceeds ofIraq's,crude oilsalesft.oIh UJ1derminiIlg

the sanctions regime by supplying cash toSaddam Hussein.

35. Corruption was rampant within the Program. By mid-2000, Iraqi

ministries, on the instruction of top government officials, instituted a policy requiring

suppliers ofhumanitarian goods to pay a ten percent kickback on each contract. This

kickback requirement was euphemistically referred to as an "after sales service fee"

("ASSF"); however, no services were provided. Suppliers competing to obtain contracts

under the Program were encouraged to include a ten percent markup in their bids or

purchase orders.

36. The inflated contract prices were incorporated into the Oil for Food

contracts as a way to permit the suppliers to recover from the U.N. Escrow Account the

kickback payments they had paid secretly to Iraq. Following the 2004 release of a report

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by the U.S. General Accounting Office exposing some of the abuses, the U.N.

commissioned an independent inquiry committee, headed by former Federal Reserve

Chairman Paul Volcker (the "Volcker Committee"), to investigate the Program's

performance. That committee's October 27, 2005, final report estimated that the Iraqi

government had diverted $1.7 billion in illicit income from the Program.

B. ABB's Involvement in the Oil for Food Program

37. From approximately 2000 to 2004, ABB participated in the Oil for Food

Program through six of its subsidiaries: ABB qd Jordan ("ABB Jordan"), ABB

Automation, ABBIndustrie AC Machines and ABBSolyvent-Ventec (collectively

referred to as "ABB France"), ABB AG ("ABB Austria") and ABB Elektrik Sanayi AS

("ABB Turkey"). The·sixsll:b.,sidi~ries:deyelo~d var~ous schein~~ to pa:ysecn~t .-.0-:.

kickbacks to Iraq in order toootaincontracts. The ,kickbacks were characterized as after

.sales service fees but in reality they were nothing more than bribes paid to the Iraqi

regIme.

38. Kickbacks of approximately $810,793 were paid in connection with the

subsidiaries' sales of goods on twenty-seven contracts With promises to pay additional

kickbacks of$239,501 on three other contracts. The total revenues on the contracts were

approximately $13,577,727 and profits were $3,801,367. ABB improperly disguised the

ASSFs on its books and records by mischaracterizing them as legitimate after sales

services, consultation costs or commissions.

ABBJordan

39. ABB designated ABB Jordan as the entity with authorization to facilitate

sales to Iraq for ABB subsidiaries. ABB Jordan paid kickbacks to Iraq on various ABB

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Jordan contracts, as well as on contracts awarded to other ABB subsidiaries. hi

particular, from approximately August 2001 to June 2002, ABB Jordan paid illicit ASSFs

of approximately $309,484 in connection with eleven ABBJordan contracts for the sale

of switchyard equipment to the Iraqi Electricity Commission and the Commission's

regional company, the Baghdad Mayoralty, all government entities. ABB Jordan also

agreed to pay a 10% ASSF on one other Oil for Food contract but the U.N. had ABB

amend the contract to remove the ASSF amount before it was paid.

40. In early 2001 the General Manager ofABB's Baghdad office began

receiving repeated verbal and written requests frru;n officials within the Iraqi government

for the payment of 10% fees on all Oil for Food contracts. In March 2001, the Baghdad

General Manage.t: and aIlABB Jordan emp~oyee tra~eled to' Zurich, Switzerlan,d, torile~t, . . . .'. . . ' .. --., ,... ,. . ;.-. . ". . -. ": .'

. . '. .:,': .'

.with ABB's Group Export Control ("GEC") about thepaym~p.t <ieInand~. TlIeGECwas .

'. the ABBgroup responsibleformonitoririg all exports to Iraq. ABB employees who

. traveled to Zui:ichin 2001 allegedthatGEC'authorized them to pay the kickba~ks. GEe.

personnel, however, alleged that no such approvals were provided. After the GEC

approvals were allegedly obtained, the ABB Jordan employees inflated their Oil for Food

contract bids by approximately 10% to cover the cost of the kickbacks they intended to

pay to Iraq. The artificially inflated contracts were then provided to the UN for approval.

At no time did ABB notifY the UN that it was secretly paying ASSFs to Iraq. Proofof

the payments was found in certain ABB documents. For example, ABB Jordan's internal

project costs documentation referred to the kickbacks as legitimate costs for "after sales

services," "consultation costs" or "training." ABB Jordan used bank guarantees to make

the first two ASSF payments to the Baghdad Mayoralty.

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", ..'

41. The subsequent nine ASSFs were paid in cash and hand delivered by the

General Manager ofABB Jordan to a designated official at the Iraqi Electricity

Commission. ABB Jordan received written receipts of the kickbacks paid in cash to the

designated official. ABB Jordan's profits from all twelve contracts, including the

contract where a kickback was promised but not paid, were $970,276.

ABB France

42. From approximately 2000 to 2002, ABB France entered into six contracts

for the sale of electrical accessories and equipment to the Iraqi Electricity Commission

andthe Ministry ofIndustry and Minerals in which kickbacks· of approximately $244,844

were paid. ABB France used French Agent, a French company headquaI1:ered in Paris, as

its local agentinIra;g to fa~ilit~teeach.0nh~~ale~. The french Agent submitted~en4er

. offers on behalfofABBFrance and negotiated.contract terms with the Iraqic.ustomers.

The use of the French Agent violatedABB's internal policies andprocedUres, which :. '; .. '.

required all contacts with Iraq to be handled by ABB Jordan. The Jordan office was the'

only ABB subsidiary authorized to deal with customers in Iraq, and agents could not be

used unless specifically authorized by ABB Jordan. ABB's company policy also

required all contracts with Iraq to be reviewed and approved by GEe in Zurich,~

Switzerland. Despite this, there is no indication that ABB France ever approached GEC

for approval ofany of its Oil for Food contracts. In addition,ABB could not locate any

written agency agreement with the French Agent, and it could not substantiate the

performance ofany legitimate business services by the French Agent. Records show that

ABB France paid the French agent commissions of anywhere from 2.5% to 17% on the

Oil for Food contracts, with an average commission of9%.

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43. An April 2002 receipt shows a payment of$1O,OOO by ABB France to the

Iraqi Commission of Electricity in connection with a 2001 OFFP contract. In connection

with another 2000 OFFP contract, a July 2000 handwritteriinternal document references

a payment of20,000 euros,and described the payment as a "10% commission for the

Iraqi government." The document was likely prepared by ABB's former area sales

manager for ABB France.

44. From approximately March 2000 to at least February 21, 2002,ABB

France used the French Agent as a distributor to-facilitate five additional contract sales to

Iraq. The French Agent purchased goods'directly from ABB France for its own account.

The French Agent, in turn, then sold ABB France's products to Iraq and submitted its

own inflated.contracts to.theU:~N..Thus, ARB Frallce wasno lOl1gerthe p.artynam~d.ofl. ............-.: ".-. ,'-:' '.:-:'...,' •••• -, : .••..• '0 .", .-:. '.

the inflated contractstothe·U.N; Asa result, ABB was able to move its goods into Iraq; .

. but keep itselfdistanced from.any involvement in the ASSF scheme. The French Agent

paid kickbacks of approximately $92,805 ori the contracts.ABB France paid the French

Agent fees through the use of performance bonds and bid bonds on the contracts that

equaled approximately 10% ofthe contract value. The French agent used these

additional payments from ABB France to pay kickbacks to Iraq. Altogether, ABB France

obtained profits of$768,584 on the eleven contracts.

.ABB Austria

45. ABB Jordan also facilitated kickbacks paid on behalf of ABB Austria.

From approximately 2000 to 2002, ABB Austria entered into three contracts for the sale

of electronic and switchyard equipment to the Iraqi Electricity Commission in which

kickbacks of$3,865 were paid. ABB Austria submitted the contract bids to Iraq on

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behalfofABB Utility Automation GmBH, ("DEUTA"), a German subsidiary of ABB

Ltd. DEUTA prepared the bids for ABB Austria, which then forwarded them to ABB

Jordan. The ABB Jordan employee responsible for submitting the DEUTA bids to Iraq

acknowledged that payment ofa 10% surcharge was the prevalent practice in the market

and that ABB was told that if it did not pay kickbacks it would not get any business from

Iraq. The employee acknowledged that a 10% increase between the bid and purchase

order price on one ABB Austria contract could have related to an ASSF fee to Iraq. ABB·

Austria's profits on the three contracts were $8,386.

ABBTurkey

46. Similar to Austria, ABB Jordan facilitated kickba.cks paid on behalfof

ABBTurkey. FroinapproxiIllately,,:t:001,t020q2, ABB Turkey enter.e~ intotwo .cQntract~

With the Ministry ofOil Economics and Finance Department ("MOEFD") on which

kickbacks of$159,795 were paid. AfterABB Turkey submitted bids for contracts, Iraqi

officials would demand that kickbacks be addedto the price of the contracts. ·ABB

Turkey was notified that it would not receive any contracts if it did not agree to the .

kickback scheme. The secretly inflated contract prices were submitted to theUN for

approval. There are two April 2001 side agreements, signed by ABB Turkey,t()pay.

kickbacks to the Iraqi North Oil Company in connection with the MOEFD contracts

described above. There are additional side agreements signed by ABB Turkey, in which

ABB Turkey authorized, but did not pay, $239,501 in improper ASSF payments in

connection with three additional contracts.2 Despite the fact that ABB Turkey had

entered into written side agreements to pay the kickbacks, ABB Turkey sent a letter to the

Because the sale was not completed and the ASSF was not paid by the time of the U.S. invasion of Iraq in March 2003, the UN required that ABB Turkey amend its contract price to remove the ASSF.

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Volcker Committee on September 1,2005, indicating that "[w]e have gone through our

records and reviewed our files, and our findings show no unauthorized payments to the

Iraqi government under the scope of this programme." ABB Turkey's profits from all

five contracts were $2,052,121.

IV. ABB Committed Anti-Bribery, Internal Controls, and Books and Records Violations

47. ABB, through its U.S. subsidiary, made millions ofdollars in illicit

payments and promised payments, either-directly or indirectly, to Mexican government

officials to obtain or retain business. ABB made use ofU.S. mails and interstate

commerce to carry out the scheme. ' ,

48.,' 'lriconnecti~mwithall ofthe illicit payments in Mexico and Iraq, and th~', ','.: ,.

payments that were part ofthee;nbeizlemerits~henie;,ABBfailediomake and 'k~ep"

accurate books, records and accounts. 'The bribes and other illicit payments were, '

improperly recorded as legitimate'cormnissionsor other expenses' in ABB'sbooks and' .- ':.

records.

49. Moreover, as evidenced by the extent and duration of the illicit payments

to foreign officials, the large number of ABB subsidiaries involved in these bribery and

kickback schemes, ABB's knowledge from the prior Commission action of illicit

payments byother ABB subsidiaries, the improper recording of millions of dollars of

illicit payments in ABE's books and records, ABB's failure to detect these irregularities,

and ABB's failure to conduct sufficient due diligence on local agents and others, ABB

failed to devise and maintain an effective system of internal controls to prevent or detect

these anti-bribery and books and records violations.

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CLAIMS FOR RELIEF

FIRST CLAIM (Anti-Bribery)

[Violations ofExchange Act Section 30A]

50. Paragraphs 1 through 49 are re-alleged and incorporated by reference.

51. As described above, ABB, through its agents and subsidiaries, corruptly

offered, promised to pay, or authorized illicit payments to one or more persons, while

knowing that all or a portion of those pa~ments would be offered,. given, or promised,

directly or indirectly, to foreign officials for the purposes of influencing their acts or

decisions in theIr official capaciiy~ inducing them to do or omit to do actions in violation . - " . .' '."

oftheir official duties, securing an improper advantage; 'or inducing such foreign officials

tOllsetheit iIifluence'witha fotei'gIi goyeinment or.instrumentality'ihere<ifto assist ABlf": '.. "

in obtaihirigorretaining business.

52. By reason of the foregoing~ ABB violated, and uriless enjOined will

'. ,

continue to violate, the anti-bribery prOVisions of Section 30A of the Exchange Act [15

U.S.c. § 78dd-l].

SECOND CLAIM

(Books and Records) . [Violations of Exchange Act Section 13(b){2)(A)]

53. Paragraphs 1 through 49 are re-alleged and incorporated by reference.

54. As described above, ABB, through its officers, agents and subsidiaries,

failed to accurately and fairly reflect its transactions and dispositions of its assets by

inaccurately recording numerous illicit payments as legitimate business expenses.

55. By reason of the foregoing, ABB violated Exchange Act Section

13(b)(2)(A) [15 U.S.C. § 78m(b)(2)(A)].

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THIRD CLAIM

(Internal Controls) [Violations of Exchange Act Section 13(b)(2)(B)]

56. Paragraphs 1 through 49 are re-alleged and incorporated by reference.

57. As described above, ABB, through its officers, agents and subsidiaries,

failed to detect and prevent the illicit payments revealing a lack of effective internal

controls sufficient to provide reasonable assurance that: (i) transactions were executed in

accordance with management's general or specific authorization; and (ii) transactions

were recorded as necessary to permit preptlRtion of financial statements in conformity

with generally accepted accounting prinCiples or any other criteria applicable to such . '. '.

statements, and to maintainaCcbUritabiIlty for its ~ssets..... '. ~ -,

':", :: ,":­

58. By reason oqhe foregoing, ABB violated Exchange Act Section

13(b)(2)(B) [15 U.S.C. §78m(b)(2)(B)].

·PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests that this CoUrt: enter a final

judgment:

(a) . permanently restraining and enjoining ABB from violating Exchange Act

Sections 30A, 13(b)(2)(A), and 13(b)(2)(B);

(b) ordering ABB to disgorge ill-gotten gains together with prejudgment

interest thereon received in connection with the conduct alleged in this Complaint;

(c) ordering ABB to pay a civil penalty pursuant to Exchange Act Sections

21(d)(3) and 32(c) [15 U.S.C. §§ 78u(d)(3) and 78ff(c)]; and

:'-0 ,"

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(d) granting such other and further relief as is just and appropriate.

Respectfully submitted,

Cheryl J. Scaib 0 C Bar No. 422175) Scott W. Friestad Tracy L. Price Brian O. Quinn DeI,1ise Hansberry Tonia J. Tornatore Securities and Exchange Commission .100 F. St., NE -', .. Washington, DC 20549-5030' T~le: 202-551-4403 FaX: 202-772-9286

" . -'. .......; ".:­ , ....

Dated: ,~k--~r,2010, .. . '.~.':. .' .

'". ..'.:. ';-.\ .. ' -.... . '.. '

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